The Government has awarded some of its natural gas contracts to a private company for the first time. Emmet Oliver reports.

The private sector gas supply company Vayu was this week awarded a contract to supply gas to several prisons and to Cork's Collins Barracks. The value of the contract is between €1.8 million and €2 million. The latest move reflects increasing competition in the energy sector.

In the electricity market Energia, the supply arm of Viridian, recently won several Government contracts, although ESB Independent Energy also won significant business.

Increasingly the Department of Finance is looking for Government department and State bodies to get the best value possible whether from State-owned suppliers or private sector operators.

The sites won by Vayu would have previously been supplied by Bord Gáis Éireann which still retains the lion's share of Government business. Vayu now claims a market share of about 14 per cent. Large companies like CRH are believed to be among its customer base.

The contract, which consisted of two groups of sites, was awarded by the Government Supplies Agency.

Vayu is licensed to sell gas and electricity to eligible customers. If it successfully exploits a gap in the gas market, Vayu says it might turn its attention to electricity. Managing director Tony Ennis said the company was formed to address the escalating energy costs in Ireland. It now has 11 staff.

The gas market is partially liberalised at present, with suppliers able to target industrial and commercial users.

Later this year the domestic sector of the market is expected to be deregulated. This is currently controlled by Bord Gáis, which has about 500,000 customers. Vayu has linked with the giant UK energy trading company Entergy Koch Trading, which trades over 27 billion therms of gas a year.